In a September 24 hearing, all five SEC Commissioners testified before the House Financial Services Committee, with Chairwoman Maxine Waters declaring in her opening statement: "the SEC is not fulfilling its mission as Wall Street’s cop" and raising that the SEC has not completed the pay for performance or clawbacks rules under the Dodd-Frank Act. The hearing, which marked the first time since 2007 that the full Commission testified before Congress, provided a good overview of the differences between Congress and the SEC majority, as well as the philosophical differences among the Commissioners. A good summary of the hearing is linked below and summarized here:
- SEC Chairman Jay Clayton reviewed his major priorities tied to increasing the number of public companies. With respect to executive compensation and governance, he reiterated that " SEC staff also is developing recommendations regarding the ownership and resubmission thresholds for shareholder proposals, as well as the proxy solicitation exemptions relied on by proxy advisory firms for the Commission’s consideration."
- Chairwoman Waters expressed concerns about 10b5-1 stock trading plans and noted that she and ranking member Rep Patrick McHenry (R-NC) had introduced legislation requiring the SEC to study 10b5-1 plans and determine whether limitations to such plans should be adopted, such as the number of amendments allowed and a required delay between amendments and first trades.
- There were several questions about the next steps regarding oversight and regulation of proxy advisory firms, with the focus on the forthcoming rules regarding the exemption proxy advisory firms enjoy from the Investor Advisor's Act.
- With respect to ESG:
- Republican Commissioner Hester Pierce reaffirmed her view that the focus of corporate performance should be maximizing shareholder value, noting that interests of other stakeholders were ancillary to that goal.
- Democratic Commissioner Robert Jackson stated he believed that ESG issues should be measured and disclosed, adding, according to the Cooley blog that "it is really up to shareholders to determine what is material," which is not the current standard of materiality (it is determined by teh company based on what a "reasonable investor" would expect.
- Chairman Jay Clayton added that with materiality as the touchstone, he favored a principles-based disclosure for ESG because of the wide differences in what may be pertinent for different companies in different industries.